Tag: Facebook (Page 2 of 7)

The Power of Platforms

Mary Meeker has just released her almost iconic annual “Internet Trend” report. In it (on slide 7), she points out that 88% of the smartphone OS share is now “made in USA”. Now, this might be good for the patriotic US soul but it signifies a much more important thing and that is the shift from carrier control to platform control. If you are an EU politician, you may lament that the current winners are from North America, but the fundamental shift does not actually depend on it (there will be Canada on the map next year again, and we may well see some Asia-led one, too).

The forced break-up by Apple

The introduction of iOS by Apple moved the access to the ultimate customer, the end user, from carrier to platform owner. With hindsight, carrier execs are probably pulling their hair out that they allowed this but they were falling all over each other when Apple came out with its shiny iPhone back, when?, in 2007.

This introduced a monstrous disruption in the telecoms industry as it marked a move from where carriers could dictate what they would or would not allow over their networks to being virtually at the mercy of the platform owners. It was, however, less about the shiny devices (though it helped their market cap to untold heights) but more about the platform approach. And therefore, Apple was, of course, quickly joined and then swiftly overtaken by Android. Today, they now rule the roost (though Apple is fast falling behind).

The Power of (Somewhat) Open Systems

Seen from today, a lot of criticism of the early leader, Apple, is centered around closed systems. People complain that iOS is too restrictive and does not allow them to do what they want to do (take any number of services, be it iCloud, iMessage, Game Center or anything else – they only function on Apple devices). Alas, back in 2007, that didn’t sound so bad. Because, you see, back then there was a) hardly any interaction and b) the one there was was restricted in “my” (haha) carriier network. But then, who cares, right? My friends are on any number of networks, and they change frequently, too. The carriers, however, thought that they could tie people in. Hell, some even thought they could become cool (anyone remember Vodafone Live!?). But that should not happen. And therefore the world changed.

Then came Android and, with it, the ability to dip into an even larger ecosystem, namely Google’s. I mean, who doesn’t use them, right? And with their “don’t be evil” motto, they took it up another notch. The Apple users were thenceforth fanboys and irrational, high-spending hipsters. Proper geeks would go with Android. Now though Google also starts showing signs of wanting to rule the world. The don’t be evil thing hasn’t been heard for some time

The Next Step?

And if you go through Ms Meeker’s deck a little further, you’ll find a lot of slides where Sina Weibo, Tencent, Amazon, eBay, etc feature. And you know what? Neither those companies nor their users give a toss whether the service is being delivered on iOS, Android, BlackBerry 10 or otherwise. They just want their service. And this is the challenge the current platform owners have (and it might sound vaguely familiar to the one carriers had): how to keep your users tied into your platform? It started of on the “it’s easier, better, simpler” lure. However, on most both iOS and Android people now start to realise that that might not be so: why does Google force me into a Gmail account (or is it Google+ now?) in order to get the most out of my shiny new phone? Why does Apple not allow me to share XYZ with my friends independent of what handset system they choose to use? This, incidentally, is why it makes insane sense for BlackBerry to release its BBM solution across other operating systems, too… (but this will be the only corporate plug today).

In short, when you look at the overall ecosystem, people want Facebook, Twitter, Sina Weibo, Line, Snapchat, Instagram, YouTube, LinkedIn, Skype, WhatsApp, you name it. They don’t really care where. Does this sound familiar? The first iPhone users went to AT&T because they were it was the only carrier that had it. Today, they’d scoff at a carrier that doesn’t have it (just ask Sprint, they allegedly struck a [too?] rich deal to get it).

What this means is that, in the (near) future, it will be less about operating systems (come on, who cares about them?) but more about actual applications. So what’s the winning one? Facebook? Twitter, Skype? I’d argue there’s more to come. We’ve heard of Line, Kakao. So what about Alibaba (check slide 69 on Ms Meeker’s deck), or Tencent’s We Chat (slide 65)? It is services and products users crave. These are platforms all right! The only reason they went for the platform owners was that they had better access routes than the (previous) incumbents. Now though they might have called in old Goethe’s Faust:

Do you not see the ghosts I’ve called?
Came in the night when I was asleep.
Here in the dark far too big.
The ghosts I’ve called won’t let me go. 

So then, dear friends, what next?

Carnival of the Mobilists # 260

As per usual, another week, another carnival (if things were only like this in real life, too…). This week’s edition of the Carnival of the Mobilists is being hosted by the formidable Antoine RJ Wright, and it is full of goodies. He is featuring:

  • Not one but two posts on BlackBerry (and I have no involvement in either; cf. my About Me page for disclaimers), one looking at its (apparently) impending death and offering advice on how to fix it and one looking at its (apparently) robust health despite recent dips.
  • A very interesting post on how handset UX affects testing.
  • A book review on HTML5 and the mobile web.
  • A report on mobile in the MENA (Middle-East and North Africa) region.
  • My own little piece on the mobile component of Facebook’s IPO (hint: there is none).
  • An interview with one of GigaOm’s mavens.
  • Plus about 10 or so more incredibly worthwhile reads including by singularity rockstar Ray Kurzweil, mobile influencer #1 Tomi Ahonen (not my but Forbes’ words) and, and, and…

Go, get a coffee (or green tea, or whatever you feel inclined towards) and allow yourself half an hour of good reading on all things mobile over here. And, if you would like to participate in the carnival yourself, you can: to submit a post, just e-mail mobilists@gmail.com. If you want to host, check out the Mobilists website for processes etc.

Facebook’s IPO with no mobile revenues

So here’s the mother of all IPOs then, and it was coming a long way. The web was buzzing, today analysts of any couleur are commenting and reading through the fine print of Facebook’s registration statement (known as the S-1) in order to find valuable nuggets of information that they had not had before and myriads of bloggers and journalists drool over the new wave of young wealthy people in the Valley.

No mobile revenue

Whilst I’d love to join into this frenzy, I want to focus on one point in the S-1 that caught my eye, and which might pose some interesting challenges for the social networking giant going forward, namely the large abyss between mobile use of the site and revenues derived from it. You will likely have read about the huge amount of Facebook users regularly using the site from mobile devices. According to the company itself, 425m active users (out of a user base of 845m) accessed the site using mobile devices; that’s more than 50%. And yet, Facebook does not derive “any meaningful revenue” (quote from their S-1) from it.

Why (these) ads don’t work as well

This is, of course, because it – thus far – did not find a good way to display ads in their various guises to mobile users. The screen real estate is scarce and it would be easy to destroy the user experience by doing so. However, with that growth in usage, they may have to review this approach. The challenge is then to successfully marry user experience on a small(er) screen with revenue-generating activities. And, alas, the latter are so far mainly display ads of various sorts. How successful will those be? My guess is not very much. It is likely one reason why Facebook so far has shied away from using them: it might just destroy the user experience to an extent that its users would be seriously upset.

And yet, it is only the latest case of highlighting one of the common fallacies of migration from web to mobile (and I am not even saying they are wrong to move that way; their user growth and occuption of that space will likely counter-balance that; I think it was Accel’s Rich Wong who said that it is easier to find revenue streams once you have 100’s of millions of users than to find 100’s of millions of users with a (pre-)defined revenue stream). Nevertheless, none of us would watch a TV commercial showing you a static picture and someone reading something out from the off (this is exactly how TV advertising kicked off). We were not overly thrilled by early attempts of online advertising; they were merely an attempt to convert billboards and printed circulars to the digital realm. It was not until Google’s AdWords that online advertising really hit it off. So why would we now be content with a mere port from another form of media?

The Japanese way?

Japan has shown that there are other ways. Japan’s GREE reportedly records similar revenues from about 5% the user base than Facebook does. It does so mainly with virtual currencies and goods (and, yes,  it has moved to a slightly different target market); users can customize their experiences within that social network by buying “stuff” to embellish their avatars, play, use, customize content, etc. Japan has always been something of the Galapagos Islands when it comes to mobile usage: what worked there didn’t often work elsewhere (anyone remember i-mode?). However, we are seeing a similar effect on smartphone applications: 65% of the top-grossing apps these days use some sort of “freemium” feature. This approach might be too late for Facebook now though. Its users would be up in arms would they start charging for features that users have come to see as free.

I am fairly confident that the good folks of Facebook are here to stay but I am still thrilled to see if, when and how they will begin to adapt. With all the very smart people in the company, we may just see the next wave of mobile monetization, and I wonder what it might be…

So social lost its sizzle, huh?

Happy new year, everyone! (that is, if you are inclined to follow that particular calendar…)

Have you, like me, been reading some of the predictions on what is and what is not going to happen this year? What buzzwords to remember, which ones to avoid? What to focus at, where to “pivot” to, what to ignore?

One of the predictions I read was that social media has lost its sizzle. Markets saturated with products, failed to live up to the lofty ideas of monetising it, done, begone… Now that is, of course, the prediction of either someone who looks only what seems investable by Sandhill Road this quarter (and by that notion, he is probably correct) and/or someone who forgets that one actually doesn’t create social but would need to seek to use and aid existing sociality. People are social, you know…

To be fair let it be known that the author of this prediction, Vivek Wadhwa (@wadhwa), a man with impressive job titles and scholarly assignments, did in fact mean it in the former sense (see his comment to a reply on RWW here). However, are we declaring anything dead upon hype-deflation only?

“Social” battles with the challenge at the moment that lots of me-too-business tried and failed to harness its power and make money from that at the same time. Now, I wonder whether that means it’s dead though…

On the “Facebook for rabbit breeders” side of things, I would just say that there can only ever be so many useful things for so many people. Get on with it. However, a lot of businesses think they have tried out “social” and have largely failed at it. That is a little more substantial perhaps but there are a number of reasons for this (and these are only the very few I could cook up on the last calm day before the office beckons again, so feel free to add any number you can think of!):

Reason 1: Categorizing “social media” as a marketing tool

Organizations tend to try and categorize certain “functions” or “verticals”. Social media? Ah, that’s marketing. Ooops. There are still tons of companies out there whose marketing departments conscientiously update their corporate Twitter accounts and Facebook pages twice daily, whilst blocking access to such services by their employees at the same time. If you are an engineer or product manager in such an organization, you won’t even get near anything that even smells remotely social. Now, what will your products, services, overall perception of the world take that into account?

Reason 2: Accounting for social media impact by “analysing” links, etc.

The “power” or “impact” of social media often is attempted to be measured for instance by how many leads were created (and converted into hard sales) by that link that was at the centre of last week’s social media campaign. This approach is merely mistakenly trying to press analysis of social dynamics in known measurement parameters whilst disregarding that it is an entirely different creature all together: social dynamics cannot be measured by counting the number of clicks on a link tweeted by the marketing folks (and I thought that should be pretty obvious to anyone even remotely familiar with the space by now).

Because these numbers will then be used by senior management (who are all too often not digitally native in the present-day sense of the word; doing e-mail and knowing what an IM is, is NOT where digital is at!), and, alas, social will again be relegated to the back benches of, well, marketing (because, you know, we are reading so much about this; we do have to have a report about our social media activity for our next AGM).

Reason 3: Social is a business of its own

“Social” is not offer walls, new ad-placement algorythms, check-ins, likes or otherwise. These are only fairly cruel (though effective) tools to harvest some of the fallout from social interaction: you can coerce people in using offer walls because competetiveness, peer pressure or any other familiar trait might make it desirable enough. You can put “Volker likes Brand X” bits next to your banner ads and hope you can borrow some of my (presumed) credibility with friends (although: what tells you that the fact that I like Jazz would make me buy T-shirts…) but all of these are merely utilising perfectly “normal” behavioural patterns of people: they like to socialize with those who are close to them (friends, family, colleagues, neighbours, supporters of your favourite club, you name it). It is not in itself a new business at all and, most important of all, it is not a business in its own right (I grant it to Facebook and the likes [how generous of me, huh?] that they invented a new way to make social interaction in certain contexts easier actionable (and those might indeed be difficult to replicate though if you take, say, Group On, there would seem to be tons of businesses out there that still cry out for some sophisticated new take on the models). But, again, their business is not “social”, they “only” use the combination of social behavioural patterns and unpredented scalability (and filtering abilities) of digital platforms to make what was always there easier and more accessible.

Social is witin us

The trouble then is that “social” lives with and within us. Humans cannot (normally) survive without social interaction. Outside investor presentations and elevator pitches,

social refers to the interaction of organisms with other organisms and to their collective co-existence.

(and, yes admittedly, if you have ever heard me speak, you will be familiar with this one). Does that sound like marketing? Does it sound like a check-in app? Does it sound like an online network with digital pinboards and such? No, not in itself. The real trouble is then of course that this definition misses the all-important commercial angle. You see, social interaction does, per se, not really care for gross margins, ROI and such.

Social business = aid interaction

The answer to what comprises a social business is then really is quite simple: make sure you create products or services (or indeed tweak or expand your existing products and services) to aid interaction between organisms. Period. Zappos shows it so well. Not by tweeting lots. But by interacting with their customers, by allowing the normal human to be seen, heard, recognized and appropriately responded to with whatever their question, concern, inquiry, problem at the time is. The commercial results are well-known but Tony Hsieh is still being seen as one daring bugger – I mean: how can you possibly offer people free returns without even asking? How can you possibly allow your telesales folks chat with a granny for an hour; the examples are plentiful (btw: make sure to read his book “Delivering Happiness”; it’s good!). Well, you can because it creates the social glue. It makes sure you interact with people in the way they seek to interact, and that is not normally a link-clicking way.

But they’re not a social media company, you say? They are only selling shoes by mail order after all (and tons of other stuff by now). But the way they sell them added the social fairy dust that made for this great business success. And good business it is. Just ask Amazon (who acquired them for a ton of money). But, more importantly, ask their customers! They are humans, you know…

The Internet Business is a People Business

Business on the Internet, social or not, is – as all businesses – a people business: if you do not find people to who you can add value, there is no business for you. Given how little of it has been “socialized” in the VC-speak sense, I do struggle to see why the sizzle should be gone. If you look to raise a ton of money and then flip your loss-making business on the back of a couple of buzzwords, yes, it might be over, but perhaps you should then not have been able to do it in the first place… For everyone out there seeking to create true value (and that value needs to be with your customers as they will otherwise feel horrendously ripped off the very moment they see through your tactics), then I would predict social in its current state only being the crisp morning of a bright fresh day.

To quote the legendary Buzz Lightyear: to infinity and beyond! :)

Image credit: http://heidicohen.com

This week: NY Games Conference

This week, I will have the great pleasure to attend (and speak) at the NY Games Conference. If you are on the East Coast and into games, this is where you need to be. Join us! It’s worth it. There are speakers from:

  • Ubisoft
  • Samsung
  • Majesco Entertainment
  • Yesware
  • Sony Computer Entertainment
  • TAG Strategic (yes, Ted, the man himself!)
  • Freeverse
  • Greystripe
  • Badgeville
  • OnLive
  • Atari
  • EA Sports
  • OpenFeint
  • GameHouse/Real
  • Sulake (of Habbo Hotel fame)
  • Ogmento
  • CBS Interactive
  • Fremantle
  • Wedbush (Michael Pachter himself!)
  • Tapjoy
  • RockYou
  • Hi5 (yes, Alex St John will be there to delight)
  • NVidia
  • Wild Tangent
  • GameStop
  • MTV Networks
  • Google
  • and… me…

Add to this the formidable events for which Digital Media Wire are renowned, cool downtown NYC and nothing else going on that week (well, perhaps except F8), and you’re on for one hell of a gaming conference.

See you? See you!

Social Media Growth (Infographic)

Thanks for the heads-up goes to my good friend Jonathan MacDonald!

Mobile Games Publishing in 2011

I have been blogging way too little recently, so here’s – finally – a bigger one again.

What is a Publisher?

I have recently been asked more and more what the role of a publisher in mobile gaming is today. I mean, heck, there are now even websites proclaiming the (traditional) publishers’ death. On the other hand, venerable old and ruthless new ones are on a spending spree acquiring – seemingly – studios and smaller publishers by the dozen: In the past year or so, EA gobbled up Playfish, Chillingo and Firemint (and probably a few more I don’t know of). Zynga, even hungrier, absorbed XPD Media, Challenge Games, Conduit Labs, Dextrose, Bonfire Studios, Newtoy, Area/Code and Floodgate Entertainment. So what is right?

According to Wikipedia, a videogame publisher is (was?) someone who

publishes video games that they have either developed internally or have had developed by a […] developer. […] They usually finance the development […]. The large video game publishers also distribute the games they publish, while some smaller publishers instead hire distribution companies (or larger video game publishers) to distribute the games they publish.

Other functions usually performed by the publisher include deciding on and paying for any license that a game may utilize; paying for localization; layout, printing and possibly writing of the user manual; and the creation of graphic design elements such as the box design.

Pretty old-school stuff, you say? Erm, yes. Broken down from its beautifully naive pseudo-scientific language, we arrive at the following:

  1. Publishers pay for development (i.e. absorb the development risk). This could also be classed as project finance.
  2. Publishers pay for licenses, another case of project finance – unless of course they pretty much own (legally or, through long-term licensing relationships, factually) certain IP.
  3. Publishers provide a bit of gloss and lots of marketing around a title to help it on the way.
  4. Publishers – sometimes – distribute.

Is the Same in the Digital Realm?

Now, the Wikipedia definition pretty much focuses on traditional console and PC publishing, it seems (box art anyone?). And this is where the new world sharply departs. No box art, no Walmart or GameStop deals are required if digital distribution is in place. How difficult can it be then for the more modern, more evolved (?) world of digitally distributed and, perhaps (but only perhaps) even more specifically for mobile games?

Nos. 1 and 2 above are pretty much arbitrary parts of the puzzle: you can get money from many places (or not of course) but it is a financing game, and video games could be called a specific (because intrinsically hit-driven) asset class. That is to say, these are not unique attributes.

No. 3 is a combination of money, know-how, experience and network. The more complex the landscape the higher the value of a specialist in the field.

No. 4 is, well, arguably a much easier game when you can feed your distribution channels from your own desk – via the Internet. However, again, the more channels you need to serve, the more complex the landscape, the higher the value of someone "who knows".

Nos. 3 and 4 are – arguably – what made Chillingo (based in the same honest North-West English town as I am) what it is (or, prior to its acquisition by EA, was): Chillingo seems to have had a knack of identifying good or at least decent games and promote them effectively across digital channels. Alas, their biggest hit, Rovio’s Angry Birds had not much good to say about them in terms of support. And indeed, if one looks at what Rovio did with its hit title outside of the Chillingo relationship, one can argue about the value add it had received from its publisher. But then again, Angry Birds seems to have been one of a kind, and there are other titles Chillingo brought to reasonable success that may not have had the same success – be it for lack of a Mighty Eagle such as the fearless and tireless Peter Vesterbacka or otherwise.

Changed Metrics

Chillingo, alas, is not where it’s at, I think. The war is being fought over those (in)famous MAUs – or monthly active users. You see, if you can command those hundreds of millions and parade your own wares by them, the likelihood of your next game becoming a success rises: Digital connectivity solves the dilemma of publishing of old, and that was to attract the attention of the gamer (your customer!) for your next release.

In a box-product world, you had to shout again, and very loudly, in order to have your customer part with his hard-earnd monies for the benefit of your title rather than your competitors’. This is – arguably – why EA Sports sponsors UK football (scil. soccer) broadcasts: "please, God, let people not defect to Konami’s PES from my very own EA FIFA".

Now, Zynga laughs all the way to the bank on this: if you played FarmVille, you will not have come around of realizing that CityVille was out. And you would also get additional points if you also played Zynga Poker. The result? Well, check the top-10 games charts for Facebook games for yourself. Suffice to say that Zynga is – according to the second market – worth more than Electronic Arts… Why is that? Eyeballs, addressable users, dollars spent per acquired user. That the business model is a little different for console games than it is online, doesn’t really matter for the argument here: you can drastically reduce the user acquisition costs if you play it smartly, so no need to take in $39.99 per game in order to break even. $1 or $5 will be just fine, thank you very much.

The above is also the reason for the spending spree of the publishers, I would suggest: if you can buy eyeballs and get a studio with proven skills (just check out either of Newtoy or Firemint on the mobile end), and you can combine it with a mechanism to attract people to future releases, there is a much better chance you can recoup your investment on that future release (effectively de-risking nos. 1 and 2 from the above list).

And now for Mobile!?

Zynga, EA’s Playfish and Crowdstar have shown that you can tweak the fortunes your way if you smartly combine game releases, updates and promotions to work with each other. But how is it for mobile? Backflip Studios, which rose to fame with a simple but well-executed game ("Paper Toss"), claimed to have had racked up more than 2m daily active users and 50m total downloads, mostly driven through promotion of its own titles inside, well, its own titles. Did it have a publisher? No. Does it have a very smart CEO who solved nos. 1 and 2 above and knows how to play no. 3 itself? Yes. So what about no. 4, distribution? Well, on iOS, that is a non-issue: one distribution channel to bind them all. However, on Android, it still falls short of a copycat, "Toss It", who were there earlier, are as ingenious and still rule. And elsewhere? Not much.

But we don’t have to rely on one case alone, and one by a small – though incredibly smart – studio no less. Look at Zynga’s performance on mobile. It is mediocre at best. EA though? Not so bad. What do they do? Well, apply the good old publishing principles learned in the olden world.

And this is where the specific complexities of mobile come into play: mobile is fiendishly complex. On the OS side, there is iOS, Android (in an increasing number of iterations), Windows Phone 7 (with some added spice since the announcement of their Nokia partnership), Blackberry, Samsung’s bada, and then maybe BREW, perhaps still a little bit of Symbian and J2ME. But then there are also the still mighty gatekeepers, the mobile operators. And then you will see that users tend to want to have it their specific way, ideally localized. The plethora of channels thus created makes it tough on a developer to maneuver its way through…

There are tools that can aid progress (and, yes, our very own Scoreloop provides some of them) but it is important to recognize the complexity of it all. Reaching users and convincing them with compelling offers is key to success in any world. It is important to bear that in mind in mobile, too. And if you think you cannot walk it on your own, a publisher might just be the right partner for you.

Changed Weighting

Since 1. and 2. above might not be such a big thing anymore (mobile titles can be developed for less – and, yes, I know this does not necessarily apply to the likes of "Galaxy on Fire" or "Real Racing") and 3. might be manageable but 4. might (not: always is) still be a key reason to part with some share in order to reach the user, convince the user, be able to bill the user.

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